Of course, hedging a total portfolio isn’t an all-or-nothing proposition. Clients should remain well-diversified, with exposure to both stocks and bonds. That said, there is no time like the present to deepen your conversations with clients about asset allocation. Some will be happy to hear from you, given elevated equity valuations and rumblings about higher interest rates. Others may need to hear from you, especially if they are trying to capture every last gain.
In my next post, I’ll discuss how to help clients hedge their fixed income exposure.
About Risk: There are risks involved with investing in any such products, including the possible loss of principal. Investors in the Funds should be willing to accept a high degree of volatility and the possibility of significant losses. The nature of the IQ Hedge products allows for potential benefits, which typically are not associated with traditional hedge funds.
The Funds’ investment performance, because they are funds of funds, depends on the investment performance of the underlying ETFs in which they invest. There is no guarantee that the Funds themselves, or any of the ETFs in the Funds’ portfolios, will perform exactly as their underlying indexes. The Funds are non-diversified and susceptible to greater losses if a single portfolio investment declines than would a diversified mutual fund. The Funds do not invest in hedge funds and are not suitable for all investors.
All ETFs are subject to market risk, including possible loss of principal. Diversification and asset allocation cannot assure a profit or protect against loss in a declining market.
This article was written by Adam Patti, Chief Executive Officer for IndexIQ.